Global Investing

How do rich people get rich?

April 12, 2010

An upcoming book by Kaye Thomas explains in plain English the secret of succesful investing:  Turning money into more money.

 cashWhile everyone goes through good times and bad times, the 1980 Harvard Law School graduate suggests sticking to four main rules for success:

1) Create and maintain a regular programme of saving, in an amount that makes sense relative to your income level and financial goals.

2) Create and maintain an appropriate division of your money between bonds and stocks, in a ratio that makes sensein relation to your time horizon and risk tolerance.

3) Within each division, create and maintain good diversification.

4) Keep investment expenses to a minimum.

“Every investment has two sides. A great deal for one side is a lousy deal for the other, and no one wants a lousy deal. When investment looks amazingly good, ask yourself why would offer to enrich you at his expense. Ask yourself why isn’t everyone buying this investment if it’s so great. The better an investment looks, the more likely there’s a hidden catch,” Thomas writes.

“Disastrous investment results can nearly always be traced to a violation of  one or more of these rules,” he says, adding that the easiest way to follow these rules is to invest in low-cost index funds.

So now you have no excuses.

Comments
9 comments so far | RSS Comments RSS

There’s only one way to get rich, and it’s only one step.

1. Spend less than you make.

Posted by drewbie | Report as abusive
 

People get rich when they are stingy, they are too greedy otherwise.

Posted by Ghandiolfini | Report as abusive
 

They work ungodly hours

Posted by Story_Burn | Report as abusive
 

Is there a way to get rich without playing Wall Streets game?

Posted by iflydaplanes | Report as abusive
 

Number 5. Don’t have a major illness, avoid divorce, and most of all, “worry all the time, and don’t have any fun. I have found that property, owned outright, has been the best investment for me.

Posted by fred5407 | Report as abusive
 

Rich people get rich because poor people spend all their time complaining about them, while driving a financed car to the theater to pay $10 a ticket on a credit card to watch 8-figure salary Hollywood elites entertain them. Let’s use a little thought here, can we?

Posted by russdward357 | Report as abusive
 

if your outgo exceeds your income your upkeep will be your downfall

Posted by onchor | Report as abusive
 

Rich value money more than poor or middle-class people do. Poor think they can never get rich and spend everything they have while middle-class hopes to get rich and emulate the rich leading an aspirational lifestyle on credit cards. The trick however seems to be in valuing the money and not spending in unnecessarily and being oneself.

Posted by CeeJey | Report as abusive
 

Unless you’re incredibly self-aware and have a very clear career path designed for yourself, go to the best possible school/college you can get into. These places can open up a LOT of options.

Recognize your limitations. If you’re the third best player on your middle-division college football team, it’s unlikely that you’re going to become a professional athlete. Invest in a good education. It’s just best chance to raise your standard of living.

Specialize!!! If you want to ensure you have a well-paying, secure job, do something that requires some skill. It can be a blue-collar job even but something that requires a couple of years of training, ideally something that requires judgment. That’s something machines can never replace.

Keep your savings in REAL money – precious metals – rather than in fiat currency that loses over 8% of its value each year. That’s an extra 8% you’re paying in income tax due to loss in purchasing power.

DON’T pay Interest on ANYTHING. If you can’t buy it outright then invest your money in something that earns you a decent return (hold it in gold even) and then wait until you can afford to buy it outright. This applies to houses, cars, gadgets. If you do some financial analysis, you will see that you are almost always better off.

Most of all, you have to be PATIENT!!! People don’t become millionaires overnight. Even the bankers who make millions today have had to work 70-80+ hrs/week for about 10 years to get to the point where they are now making real money. Social mobility is TOUGH and the least you can do is move up a notch and then give your kids the skills so that they can move up a notch from there. There is no easy route to becoming rich. Trust me :).

Posted by Alekhine | Report as abusive
 

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